WACC for Fake Private Company
Doing a case competition over break where I am running a DCF on a make-believe restaurant company. There is pretty minimal financial data, but enough for a DCF (They don't even give Net Income, so I am using industry average Tax Rate).How would you go about finding the different components for WACC? For example, should I find similar companies and use an average of their beta? There is a lot of great PE information on EV/EBITDA and Sales/EBITDA multiples for restaurant companies.My model is solid so far (imo), but definitely need to narrow down the WACC components, g, and the EV/EBITDA multiple.Never looked at a private "company" before so any direction is greatly appreciated.
Don’t have full info on your exercise, but here some pointers. First, if you are using WACC you are valuing the firm. So should use FCFF. You can assume 25% tax rate or something like that. Second, for WACC you can get industry beta and adjust it for the capital structure you are assuming. If they don’t give you capital structure, then don’t know how if you are supposed to assume one. But if I were you I’d just use a range of 8-10% for WACC. That’s what people do at work most of the time.
Thanks a lot. That is a huge help
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